How we can tell if sterling’s recovery is the real thing

UK pound vs the euro

Inspired by Mrs T&T returning from the supermarket with an expensive bag of gold foil covered chocolate coins for the Xmas tree, a look at how sterling is performing makes a lot of sense. In recent months, many feints on this pairing serve to confuse, but we’re not inclined to any optimism unless the relationship betters €1.145 – blue line in the chart.

To cut to the chase, lacklustre moves tend to make us suspect weakness now below €1.11 will once again find its way down to the €1.0845 point, and a probable bounce against the red uptrend line since 2008.

A very real problem comes should ‘red’ on the chart be broken as continued limp movement down to €1.0715 becomes very probable.

As the chart highlights, this is an issue.

The red uptrend since 2008 has, as the two light red lines show, been a somewhat fluid construct. Despite the pairing recovering above the most recent iteration of this trend line, we’re inclined to view the drop earlier in 2017 as a warning signal.

If this were a share, we’d harbour strong suspicions the ultimate intent is for €1.02 as best case calculation. Worst case calculation comes along at €0.83.

So, now we’ve enjoyed spreading some festive misery, it’d be daft to ignore the salient detail the pairing actually does not require much work to escape our grotty outlook.

The immediate situation is fairly interesting with the relationship only needing better than €1.13 to suggest near-term growth toward €1.135.

In itself, this isn’t really worth note, but should sterling manage above €1.135 we’re looking for coming growth toward €1.152. This fairly comprehensively betters the downtrend since 2015 and makes future movement toward €1.21 believable.

And this would prove a really big deal, taking our once proud chocolate coins above the prior glass ceiling at €1.20, and into a region where visits to the UK by tourists become more expensive as we’re looking at €1.32 as a realistic growth target.

For now, we’re braced for the worst. And hoping for the best. And do all wives point out how many chocolate coins they intend to hang on the Christmas tree when it goes up? The distrust is shocking, absolutely shocking!


Alistair Strang has led high-profile and “top secret” software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know “how it worked” with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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